@ChrissCrypto
What are Smart Contracts? - Introduction
***Smart Contracts are computerized transaction protocols***, ***which automatically execute predefined conditions written in the Blockchain***. ***Using the Conditional Instructions*** "***IF ... THEN***"; If Condition A is reached, then Execute B. **They became popular since 2015** thanks to the **Ethereum Blockchain**, created by Vitalik Buterin. The most famous Smart Contract is still **Bitcoin (BTC)**, although it is limited to purely financial use, and the exchange of Cryptocurrencies. https://bitcoinmeister.eu/bitcoin/ While the Smart Contracts developed thanks to and on the Ethereum Blockchain have a more diversified range of applications: ***Financial Transaction*** ***Creation of Currencies*** (Tokens) And above all the important advantage, is the ***creation of Smart Contract directly by developers*** Whereas in our current society, everything is centralized: *Banks centralize their contracts* *Insurances centralize their contracts in a Cloud and centralize especially the customers' information* *The Courts centralize the cases* ... **Our future can only be made in**: ***Decentralization & Automatic Execution*** Before going further into this subject, it is necessary, if not essential, to **know that Smart Contracts are not SMART and are not legal CONTRACTS either**. Let me explain: **The word** ***SMART*** **is mostly used to designate something that is**: '***Clever***', '***Evolutionary***', or that represents a '***New Technology***' (just like the words 'Smart Phone', 'Smart Homes', 'Smart Cities') **The word** ***CONTRACT*** **will rather refer to the** ***agreement*** **between 2 or more parties involved in this commitment** **Smart Contracts were Conceptualized and Developed by** **Nick Szabo**, **in 1994**, long before the birth of the first Cryptocurrency (**Bitcoin (BTC)** which appeared in 2009, with its first mined Block, named 'Genesys Block'), but also long before the birth of Nick Szabo's Virtual Currency '**Bit Gold**' (created in 1998) https://nakamotoinstitute.org/the-idea-of-smart-contracts/ https://bitcoinmeister.eu/bitcoin/ Whose brief presentation is: "***A computerized transaction protocol that executes the terms of a contract. The general objectives are to satisfy common contractual conditions***". At the time of its creation, Smart Contracts could already be applied to several fields: ***Credit System*** ***Payment processing*** (e.g. payroll for a company) ***Content Rights Management*** (such as copyright for music that was broadcast on Radio, TV or during a show) Globally, **Smart Contracts are hosted on a dedicated Blockchain**. The **most widely used is the Ethereum Blockchain**, but recently there are others that offer Smart Contracts: ***Cardano Blockchain*** ***EOS Blockchain*** ***Tezos Blockchain*** ***NEO Blockchain*** ***Tron Blockchain*** Not to mention that the **Bitcoin Blockchain can also host/propose Smart Contracts** The use of the **Blockchain**, as well as **Decentralization in the process of use and application** of Smart Contracts allows the **impartiality of the process of Validation** of these. A **Smart Contract remains nevertheless a computer code**, **coded by a Developer** or a Web Developer, who **must also have a good knowledge of Blockchains**, who **can also be assisted by a Lawyer** to be close to the Law, while knowing that the **Smart Contract has no legal value**. But as soon as they are deployed on a Blockchain, they no longer require supervision or controls from a third party The **creation of Smart Contract is very complex**, the writing itself can be the first source of bug, hence the interest to use from the beginning the good programming language, such as: ***Solidity*** (the most used on Ethereum, and especially the simplest for novices) ***Viper*** ***Serpent*** (similar to Python) ***Lem*** ... **The advantages of Smart Contracts are:** Economic and fast processing of transactions Perfectly clear and precise content Predictability of the Contract settlement No possibility to influence the Contract High transparency as well as reliability and security Processing via a global infrastructure Low deployment and transaction costs **But they also have limitations:** Requires a digital database Access to information outside of the Blockchain is restricted, need to use Oracles No possibility to influence or modify the Contract, once it is deployed on the Blockchain No mechanism in case of dispute Co-contractors are often anonymous Adopts a binary transaction logic → IF ... THEN **The application domains are very broad:** Finance Insurance Fixed and recurring payment Auctions Identity management House/Apartment/Car Rental Payment of Artists/Musicians Traceability of Food and/or Pharmaceutical products Local/National Elections Cryptocurrency exchange platforms It should be noted that, even if **Smart Contracts are extremely secure**, because they are **hosted on a Blockchain**, ***they are coded by Humans***, and Humans can be: ***Partial*** ***Fallible*** ***Sick*** ***Incompetent*** ***Corruptible*** And a **simple error in the Code**, **can be exploited by Hackers** who can take advantage of it, as it was seen on **June 17, 2016 with The DAO** (The Decentralized Autonomous Organization) had raised $150 Million (while the ETH was worth $20 at the time), ***an error in the code allowed Hackers to steal $50 Million*** While **Computer Programs have no Souls**, so in case of a security problem, the only one at fault can be the one who wrote the Contract. And **they are also less expensive than a Human**, hence the principle of automating actions by the Program for a significant gain of money *****Remember also, that the power of a Smart Contract lies only in the intelligence of its programmer***** More details to come on: ***How a Smart Contract works*** ***Which Blockchain and which programming language*** ***Difference between Smart Contract and Classic Contract*** ***More detailed application areas ...*** To be continued. See you soon **Christophe WILHELM** **Bitcoin Meister** https://bitcoinmeister.eu/?ref=12 **© Bitcoin Meister** Source pics: **Google** http://www.google.com/ Resources https://bitcoinmeister.eu/ https://nakamotoinstitute.org/
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